Business

OECD says global economy will grow more slowly than expected

PARIS - A leading international organization warned Tuesday that the global economy will grow by less than expected this year after it lowered its forecasts for the United States and China.

The Paris-based Organization for Economic Co-operation and Development said the global economy will grow by 3.4 per cent this year, down from its forecast of 3.6 per cent growth last November.

The OECD, a think-tank for the world's most developed countries, cut China's growth forecast this year to 7.4 per cent from 8.2 per cent in November. Meanwhile, the U.S. economy is forecast to grow 2.6 per cent this year against last November's 2.9 per cent estimate.

Economic growth in Canada is projected to accelerate to 2Â¾ per cent by 2015.

"Exports are set to gain momentum, supported by stronger foreign-market growth, the recent currency depreciation and continuing energy-sector expansion," the OCED said.

"With economic slack fully absorbed, inflation is projected to rise to nearly 2 per cent by late 2015."

It said as inflation approaches the 2 per cent target, monetary accommodation should be progressively withdrawn.

"Fiscal consolidation should continue as planned. Most notably, provincial governments should continue to work on reforms that would limit growth in health-care expenditures," the think-tank said.

In its half-yearly economic outlook, the OECD also cut its 2014 forecast for Japan, to 1.2 per cent from 1.5 per cent. However, it raised its growth forecast for the 18-country eurozone to 1.2 per cent from 1.0 per cent.

The OECD warned that "financial tensions in emerging markets are one risk that could blow the global recovery off course," while falling inflation in the euro area was another cause for concern.

The body urged central banks in the main OECD areas to keep monetary policy "accommodative," given stubbornly high unemployment, below-target inflation and high levels of government debt.

In particular it called on the European Central Bank to act decisively to lift inflation and to be prepared to take "non-conventional stimulus" measures if needed.